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What’s next for the discount rate?

The needs of seriously injured people must be considered to at least the same extent as the interests of insurance companies and the public purse, writes David Marshall

18 April 2017

Lump sum settlements for people who have been injured or died in accidents that are someone else’s fault have long been subjected to a discount rate to reflect the anticipated net return on investment of that lump sum over the period of the loss for which it is awarded.

The level has recently been revised by the Lord Chancellor from a rate of +2.5 per cent to -0.75 per cent.

Lawyers take account of the discount rate when calculating future losses as a result of a personal injury or a fatality. So, for example, it could be based on projected earnings.

The +2.5 per cent rate was set in 2001 by Lord Irvine and had not been varied since, despite economic shocks in the wake of the 2008 financial crisis.

Arguably even from 2001, but undeniably since 2008, it has not been possible for a 100 per cent...

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